Sanitation and property tax compliance: Analyzing the social contract in Brazil

• Published in: Journal of development economics 2023-01, Vol.160, p.102954, Article 102954
• Main Authors: Kresch, Evan Plous, Walker, Mark, Best, Michael Carlos, Gerard, François, Naritomi, Joana
• Format: Article
• Language: English
• Subjects: Brazil; Property tax; Sanitation; Social contract; Tax compliance
• ISSN: 0304-3878; 1872-6089
• DOI: 10.1016/j.jdeveco.2022.102954

This paper investigates the role that sanitation plays in upholding the social contract, whereby citizens pay taxes in exchange for governments providing goods and services. We study the case of Manaus, Brazil, where sewer connections vary considerably across the city and property taxes are calculated in a presumptive manner that does not account for a household’s access to sanitation. We find that households with access to the city sewer system are significantly more likely to pay their property tax, relative to households that only have access to latrines or lack access to improved sanitation entirely. Our evidence is consistent with a role for the social contract in this decision, as households with sewer systems are more likely to have positive attitudes towards the municipal government. •Property tax in Manaus is calculated with a presumptive formula based on observable housing characteristics.•The property tax calculation does not factor in a household’s access to sanitation.•Households with identical tax bills can vary in having access to sewers, latrines, or no improved sanitation.•Households with sewers have higher tax compliance and more favorable views of municipal government.